Mercantilism Explained: Its Legacy and Relevance in 2025

Mercantilism is a word that conjures images of galleons laden with gold, kings amassing treasure, and European powers vying for dominance. But beyond the history books, mercantilism’s core concepts—emphasising exports, hoarding precious metals, and government intervention—continue to inform financial policy and public debate. In 2025, as nations grapple with inflation, global trade tensions, and calls for economic sovereignty, it’s worth asking: is mercantilism truly a relic, or does it still matter?

What is Mercantilism? A Crash Course

Originating in 16th-century Europe, mercantilism is an economic theory that prioritised national wealth and power through a positive balance of trade. Governments encouraged exports, restricted imports, and accumulated gold and silver reserves. The philosophy was simple: the more bullion a country had, the stronger and more self-sufficient it was.

• Government Control: Monarchs enacted tariffs and trade barriers to keep wealth within their borders.

• Colonial Expansion: Colonies supplied raw materials, which were turned into goods for export—fueling the mother country’s economy.

• Zero-Sum Thinking: Wealth was seen as finite; one nation’s gain was another’s loss.

While Adam Smith’s Wealth of Nations (1776) famously dismantled mercantilist logic, many of its tactics—like strategic tariffs or export subsidies—persist in modern trade policies.

Mercantilism’s Modern Echoes: 2025 in Focus

Fast forward to 2025, and the fingerprints of mercantilism are still visible, even if the vocabulary has changed. The past year saw a global resurgence in economic nationalism. Governments from Canberra to Washington debated reshoring manufacturing, imposing tariffs, and nurturing domestic industries—all hallmarks of mercantilist thinking.

For Australians, the conversation is especially relevant:

• Critical Minerals Policy: Australia’s 2025 Critical Minerals Strategy puts a premium on processing lithium, rare earths, and nickel domestically. The aim? Reduce dependence on imports, boost exports, and ensure ‘sovereign capability’—a mercantilist ideal updated for the age of EVs and clean energy.

• Trade Tensions: Ongoing disputes with China over barley, wine, and coal saw both nations flexing trade barriers and negotiating market access. The tit-for-tat dynamic echoes the zero-sum logic of centuries past.

• Export-Led Growth: Federal and state governments continue to champion Australia’s agricultural, education, and tech exports as central to economic resilience, echoing mercantilist priorities for a positive trade balance.

Even central banks have joined the chorus, with the Reserve Bank of Australia (RBA) noting that strong exports help buffer the nation against global shocks and currency volatility.

Mercantilism’s Lessons—and Pitfalls—for Today’s Policymakers

Mercantilism’s legacy is a double-edged sword. On one hand, strategic support for local industries can protect jobs, foster innovation, and enhance national security—compelling arguments amid global uncertainty. On the other hand, excessive protectionism risks higher prices, trade retaliation, and stifled competition.

Recent 2025 policy debates illustrate these tensions:

• Green Manufacturing: Australia’s push to become a renewables superpower involves subsidies, tax breaks, and local content requirements. Critics warn this could lead to inefficiency or diplomatic friction, while supporters say it’s vital for future prosperity.

• Tariff Wars: The World Trade Organization has flagged a spike in new trade barriers globally since 2023, raising concerns about a return to the beggar-thy-neighbour policies that once defined mercantilist Europe.

• Consumer Costs: Australians have felt the pinch from higher import prices, especially on goods affected by trade disputes—highlighting the everyday impact of mercantilist-inspired policies.

The lesson? Mercantilism offers tools and warnings in equal measure. Its focus on national interest can drive strategic growth, but unchecked, it can also undermine the open markets and global cooperation that underpin Australia’s prosperity.

Conclusion: Why Mercantilism Still Matters in 2025

Mercantilism may have peaked centuries ago, but its DNA runs through many of today’s most pressing financial debates. Whether it’s the race for critical minerals, the design of trade policy, or the push for ‘sovereign capability’, Australians are living with the legacy of mercantilist thinking—sometimes for better, sometimes for worse. As the world navigates new economic frontiers, understanding this old-school theory is more relevant than ever.